How to get richer, from wherever you sit on the wealth ladder

Don’t be spooked by where you sit on Australia’s wealth ladder. There are several ways to climb some rungs.

Aussies are among the world’s wealthiest people, but it’s not equal. Picture: iStock

Official wealth data from the Australian Bureau of Statistics must be scary, soul-destroying reading for millions of people.

According to this month’s release of ABS Household Wealth data, Aussies got more than $431bn richer between December 31 and March 31, with total wealth topping $16.2 trillion.

Based on the latest Census figures, that works out to each household holding $1.5 million of wealth.

Global investment bank UBS says it equates to average wealth of around $600,000 per person – every woman, man and child – and is “likely among the highest in the world”.

Sounds great, but it not the reality for the majority of Australians who battle wealth inequality.

A recent report by the Australian Council of Social Service and UNSW Sydney says almost half of all wealth is held by the highest 10 per cent of households, worth an average $5.2 million each.

Property has been a key driver of Australians’ wealth. Picture: iStock

“They hold 15 times the wealth of the lowest 60 per cent – $343,000 per household,” it says.

Wealth figures are skewed higher by averages and ages. It can be scary measuring yourself against averages because, for example, if one person has $1 million and the other has $200,000 their average wealth is $600,000.

Older people are wealthier because they had decades to benefit from compound interest multiplying their superannuation, shares and property asset prices.

The ABS says most of the recent gains in household wealth came from rising property and superannuation values. These deliver the biggest rewards to long-term holders, so don’t be concerned if you’re under 50 and your household has nothing near $1.5 million.

Rather than worry about being near the base of the wealth ladder, there are plenty of things people can do to start climbing it.

Small daily changes turn into big wealth gains over time. Every $10 not spent on something pointless – and instead injected into savings, investments, a home loan or superannuation – is a step towards financial security.

Do this a few times each week and your net worth grows by more than $2000 a year, plus the investment growth or interest savings gained by making that money work smarter.

Household budgets have been blown apart by bill increases in recent years for insurance, groceries, energy and other key expenses. Spending a few hours examining what you spend, and comparing it with other providers, can deliver hundreds of extra dollars each year.

Sadly, the simplest way to get richer seems increasingly out of reach for young adults. It’s property ownership – and many dreams are being dented by surging home values and high interest rates.

However, there are ways to get into property that don’t require house deposits of $100,000 or more.

Real estate investment trusts spread money over different property assets and can be bought like shares, while people can team up with relatives, friends or the Bank of Mum and Dad to get a foot in the door.

Increasing government incentives and tax breaks for home buyers should be examined too.

The share market has been a huge driver of wealth for many, and there has been a boom in micro-investing apps that let people buy small pieces of companies with just a few dollars. They round up purchases to divert spare change into investments, and provide a great starting point for climbing the wealth ladder.

Don’t forget superannuation. There are tax benefits for injecting extra, and compound interest multiplies it over decades.

The golden rule is to do something, and start today.

Originally published as How to get richer, from wherever you sit on the wealth ladder